Groupon and Your Consumer Rights

By: kent

19Jun2011

Wired Magazine posted an intriguing article yesterday about some allegedly questionable business practices of Groupon, the group-buy website that has exploded in popularity over the past year. Consumer protection advocates Benjamin Edelman and Paul Kominers estimate that Groupon may potentially pilfer consumers out of $140 million in 2011.

Well...not quite. This hypothetical amount rests on the assumption that merchants collect tax on the full, undiscounted amount of a good or service. In the U.S., as well as for most cases for Groupon deals under Canadian tax law, merchants should only collect tax on the amount actually paid (not the regular-priced "value").

Groupon leaves the collection practices up to the individual merchants, who may or may not follow proper procedure in calculating the tax. Perhaps Groupon should take more initiative in properly educating its partners, but it is centainly not at fault per se for any miscollection of tax.

However, the one area where their practices do often fall short of consumer protection requirements is in the expiry date of coupons. For example, in Ontario, in spite of Groupon's stated coupon expiry dates, a longer expiration date is often applicable under the Consumer Protection Act, 2002, SO 2002, c 30 and associated regulations:

In the case of a Groupon that is for more than one good or service, or for a non-specific good or service, the Groupon does not expiry (CPAR, s. 25.1 & 25.3.)

In the case of a Groupon for one specific good or service, the merchant needs to give detailed information on delivery of the good or service, if it costs more than $50. This includes, among other details, their exact address, a detailed description of the services, the total price including any taxes, any additional charges that apply, and the exact date that the coupon is to be redeemed (CPA, s. 21(1), 22; CPAR, s. 23.1, 24). Unless all of these specific details are provided by the merchant and agreed upon, the coupon may be cancelled up to one year later (CPA s. 23, 26(1); see also CPA s. 26(4)). In my experience, Groupons for services never comply with this requirement; thus, you have the option to cancel within a year.

Only in the case of a Groupon for one specific good or service that costs under $50 (or where the exact date and details are pre-agreed upon) does Groupon's written expiry date fully apply.

In summary, I'd still give Groupon a B+ on their practices. Just watch out for the correct calculation of tax; also try to hit the expiry dates--but double check your rights before fretting about missed ones.